DBRS Confirms A (sf) Rating on Class A Notes of Sligo Cards Finance 2015

DBRS Ratings Limited (DBRS) has today confirmed its A (sf) rating on the Class A Notes issued by Sligo Cards Finance 2015 Designated Activity Company (the Issuer or Sligo Cards Finance 2015).

The confirmation of the rating on the Class A Notes is based on the following analytical considerations:
-- Portfolio performance, in terms of charge-off, payment and cash yield rate as of the October 2016 payment date.
-- Given the transaction is still in its revolving period, ending on the November 2018 payment date, no early amortisation events have occurred.
-- The current available credit enhancement to the Class A Notes to cover expected losses assumed in line with the A (sf) rating level.

Sligo Cards Finance 2015 is a securitisation of credit card receivables originated and serviced by Avant Card Limited (ACL) and extended to Irish consumers.

As of the October 2016 payment date, the monthly principal payment rate remained stable at 12.3%, slightly above DBRS’s base case assumption at closing (the assumption) of 12%. Moreover, the cash yield rate is at the same level of the assumption of 16%. The annualised charge-off rate of securitised receivables portfolio is at 1.85% and remained below the assumption of 12.5%. The 30+ Delinquency rate is at 2.86% of the performing receivables portfolio.

As of the October 2016 payment date, the credit enhancement to the Class A Notes provided by the subordination of the Class B Notes remained stable since closing at 13%. The transaction also benefits from a Cash Reserve providing liquidity to the structure and it is currently at the target balance of EUR 4,041,821.

Elavon Financial Services DAC, UK Branch acts as Account Bank for this transaction. The DBRS private rating of Elavon Financial Services DAC, UK Branch complies with the Minimum Institution Rating given the rating assigned to the Class A Notes, as described in DBRS’s “Legal Criteria for European Structured Finance Transactions” methodology.

Notes:
All figures are in euros unless otherwise noted.

The principal applicable methodology is the Master European Structured Finance Surveillance Methodology.

DBRS has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

An asset and a cash flow analysis were both conducted. However, due to the inclusion of a revolving period in the transaction, and no change in assumptions, the initial analysis based on worst-case replenishment criteria set forth in the transaction legal documents was assumed.

A review of the transaction legal documents was not conducted as the documents have remained unchanged since the most recent rating action.

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to DBRS’s “The Effect of Sovereign Risk on Securitisations in the Euro Area” commentary on: http://www.dbrs.com/industries/bucket/id/10036/name/commentaries/

The sources of information used for this rating include investor reports provided by U.S. Bank Global Trust Services and servicer reports provided by ACL.

DBRS does not rely upon third-party due diligence in order to conduct its analysis.

DBRS was not supplied with third party assessments. However, this did not impact the rating analysis.

DBRS considers the information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

This is the first rating action since the Initial Rating Date. The lead responsibilities for this transaction have been transferred to Antonio Di Marco.

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.

To assess the impact of changing the transaction parameters on the rating, DBRS considered the following stress scenarios, as compared to the parameters used to determine the rating (the Base Case):

-- DBRS expected the Base Case monthly payment rate, cash yield and charge-off rate for the pool based on a review of the current assets. Adverse changes to asset performance may cause stresses to Base Case assumptions and therefore have a negative effect on credit ratings.

-- The Base Case portfolio monthly payment rate, cash yield and charge-off rates of the current pool of receivables are 12%, 16% and 12.5%, respectively.

-- The Risk Sensitivity overview below illustrates the ratings expected for the Class A Notes if each variable was stressed over the Base Case assumption, while holding the other variables constant. For example, if the Charge-Off rate increases by 50% and the Yield Rate decreases by 50%, the rating for the Class A Notes would be expected to remain at A (sf), all else being equal. If the Payment Rate increases by 50% and the Charge-Off rate increases by 50%, the rating for the Class A Notes would be expected to drop to BBB (sf), all else being equal.

-- While holding the Payment Rate constant, a hypothetical increase of the base case Charge-Off Rate by 25% and a hypothetical decrease of the base case Yield Rate by 25%, ceteris paribus, would not result in a downgrade of the A (sf) rating of the Class A Notes.
-- While holding the Payment Rate constant, a hypothetical increase of the base case Charge-Off Rate by 50% and a hypothetical decrease of the base case Yield Rate by 50%, ceteris paribus, would not result in a downgrade of the A (sf) rating of the Class A Notes.
-- While holding the Charge-Off Rate constant, a hypothetical decrease of the base case Payment Rate by 25% and a hypothetical decrease of the base case Yield Rate by 25%, ceteris paribus, would not result in a downgrade of the A (sf) rating of the Class A Notes.
-- While holding the Charge-Off Rate constant, a hypothetical decrease of the base case Payment Rate by 50% and a hypothetical decrease of the base case Yield Rate by 50%, ceteris paribus, would result in a downgrade of the A (sf) rating of the Class A Notes to BBB (sf).
-- Whilst holding the Yield Rate constant, a hypothetical decrease of the base case Payment Rate by 25% and a hypothetical increase of the base case Charge-Off Rate by 25%, ceteris paribus, would not result in a downgrade of the A (sf) rating of the Class A Notes.
-- Whilst holding the Yield Rate constant, a hypothetical decrease of the base case Payment Rate by 50% and a hypothetical increase of the base case Charge-Off Rate by 50%, ceteris paribus, would result in a downgrade of the A (sf) rating of the Class A Notes to BBB (sf).

For further information on DBRS historic default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU regulations only.

Lead Analyst: Antonio Di Marco, Senior Financial Analyst
Rating Committee Chair: Chuck Weilamann, Managing Director
Initial Rating Date: 17 November 2015

DBRS Ratings Limited
20 Fenchurch Street
31st Floor
London
EC3M 3BY
United Kingdom
Registered in England and Wales: No. 7139960

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies

-- Rating European Consumer and Commercial Asset-Backed Securitisations
-- Legal Criteria for European Structured Finance Transactions
-- Master European Structured Finance Surveillance Methodology
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers

A description of how DBRS analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375